The Cabinet recently approved the Production Linked Incentive (PLI) Scheme for “Specialty Steel” in India to be implemented over FY’23-24 to FY’29-30 with a budgetary outlay of INR 6,322 crore.
Objective
The aim of the scheme is to promote manufacturing of such steel grades within India. At present, the country operates at the low end of the value chain in steel manufacturing, with an average realisation of INR 51,000-58,000/tonne (t) only. In contrast, India’s steel imports have an average value per tonne of INR 146,000-183,000.
The PLI incentive will boost domestic production of “Specialty Steel” and attract significant investment for production of the same in the country.
Quantum of incentive
The scheme will extend the PLI at the rates given below:
The incentive slabs have been proposed based on the current production, ie, higher incentive for those specialty grades which are currently either not being produced in India or being produced in small quantities, resulting in relatively large imports of the same. Considering the average value of these specialty steels, imports of such grades result in substantial forex outflow from the country.
Target segments
The scheme shall be applicable for five indicative product categories:
- Coated/plated steel products
- High strength/wear resistant steel
- Specialty rails
- Alloy steel products and steel wires
- Electrical steel
Eligibility
- A company registered in India and engaged in end-to-end manufacturing of the identified “specialty steel” grades, subject to the input material being melted and poured within the country using iron ore/scrap/sponge iron/pellets etc.
- Joint ventures are also allowed to participate.
- The net worth of the company (including that of the group companies)/JV shall not be less than 30% of the total committed investment as may be notified in the guidelines.
- A maximum 20% of the total value-addition would be permissible through third parties; the incentive in such cases can however only be claimed by the company that has manufactured the end-product sub-category that is eligible under the PLI Scheme.
Tenure of the scheme
Incentive shall be provided for a maximum period of five years. The release of incentive will be from FY’23-24 to FY’29-30. The period will commence from FY’23 (PLI to be released in FY’24). The initial year may, however, be deferred by up to two years in case of specific product categories.
Due to any special/adverse circumstances, the eligible companies may be allowed to avail the incentive within one year by allowing deferment of the initial year by one year but the overall period for availing incentive is five years.
Total incentive
The expected indicative annual incentive outlay and cumulative incentive outlay under the scheme is as mentioned:
Incentive calculation
Incentive per eligible company (including group companies/JV) will be applicable on incremental production of manufactured steel grades year-on-year worked out with reference to production in the previous year or the base year, whichever is higher, subject to an annual ceiling of INR 200 crore.
In case baseline production is nil, production target for the first year will be arrived at by working backwards from the production target at the end of five years and the projected CAGR. For the purpose of calculating the incentive, incremental production figures shall be derived from audited annual sales data submitted by the applicant and divided by the weighted average sales price (net of taxes) for the current year for which incentive is being claimed.
The incremental production figures thus derived would be multiplied by the average per tonne sales price (net of taxes) for the current year or the base year (2019-20), whichever is less and multiplied by the PLI rate (as applicable) to calculate the payable incentive.
A = incremental sales in the current year with reference to the previous year or the base year whichever is higher.
B = weighted average sale price (net of taxes) in the current year.
C = weighted average sales price (net of taxes) in the base year (2019-20).
Incentive = (A/B) x (B or C, whichever is lower) x (PLI rate as applicable)/100.
*Current year means the year for which PLI has been claimed.
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